A single-life immediate annuity can deliver ample cash flow for the rest of your life. However, you could buy a single-life annuity and suffer a fatal heart attack the next day. If so, no more payments will come from this annuity and your loved ones won’t see a penny.
Thus, at the same time you buy, say, a $250,000 immediate annuity, you also can take out a $250,000 insurance policy on your life. Now, if you should have that fatal heart attack and your $250,000 disappears with your single-life annuity, the beneficiary of your life insurance policy will get $250,000 in death benefits, free of income tax and possibly free of estate tax.
If you shop carefully for both an immediate annuity and a life insurance policy, you can lock in a lifelong stream of net income while still providing for your heirs.
